Christopher Swann's Profile

The self-control credit card

By Christopher Swann

May 26, 2009

The handsome margin by which members of Congress voted to clamp down on the credit card companies should send a powerful signal. With their political power eroding fast, card issuers have to do some urgent rebranding. In fact they need to show more than usual moral rectitude in order to rebuild their reputations.

One intriguing way of doing so is proposed by Dan Ariely, professor of behavioral economics at Duke University and author of Predictably Irrational. Ariely envisages a “self-control” credit card – enabling people to restrict their own spending. Impulsive consumers could impose their own limits on how much they could pay out at a particular store, on a particular category of goods or over a certain time period. (For example a cardholder might fix a limit of $300 a month on clothing.) They could also select their own punishment for lapses. This could be a simple as the embarrassment of a rejected card or more elaborate slaps on the wrist – such as donations to charity or an automatic email to a judgmental spouse, mother or friend.

The rewards to any credit card company bold enough to introduce such a smart-card may be more than merely political. As the recession deepens the thrift value of products has become a dominant theme in advertising. In an industry that dispatches around six billion almost identical direct-mail adverts a year, it is not hard to stand out from the crowd. Revolution Money has been gaining a great deal of attention merely by dropping exchange fees and offering a slimmed down half-percent processing charge. A braver move towards a self-control card could help a forward looking company capture a large chunk of the market – enabling them to pose as a consumer champion.